Deficit Reduction Act of 2005
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The Senate's version passed after a tie-breaking vote was cast by Vice President Dick Cheney. The bill passed the chamber with all Democrats and five Republicans voting against the bill. The House version passed by a vote of 217-215, with all Democrats, fourteen Republicans, and one Independent voting against. The Senate bill was signed by President George W. Bush on February 8, 2006.
Dispute over legal status
A dispute arose over whether both houses of Congress had approved the same bill. Those contending that the bill is not a law argue there were different versions of the same bill, neither of which was approved by both the House and the Senate. They argue that the document signed by the President would not have the force of law, on the ground that the enacting process bypassed the Bicameral Clause of the U.S. Constitution.
Congressional leaders and administration officials point to an 1892 Supreme Court case, Field v. Clark (143 U.S. 649 (1892)), which said the dispute—over differing versions of a bill that were certified by both chambers—was not a matter for the courts to decide.
The difference between the two versions is the provision regarding the length of time that Medicare would be required to pay for durable medical equipment such as wheelchairs and oxygen equipment like CPAP machines. The Senate version of the bill restricted payments to 13 months while the House version provided for 36 months, a $2 billion difference. Just prior to the filing of the bill in the House, a change was required to alter these time periods, in three places the number 13 was changed to 36, by hand in the offices controlled by the Speaker. The change was needed to assure the requisite number of votes for passage in the Senate. This hand written drafting change gave rise to an error made by the Senate clerk later in the process.
The discrepancy resulted from what officials have called a clerical error in the transmittal of the text between the Houses. After the bill was filed in the House of Representatives and voted on, it was sent to the Senate. In that chamber, the bill was considered again. Several provisions were stricken due to a point of order under section 313 of the Congressional Budget Act (commonly known as the "Byrd Rule" after its author, Senator Robert C. Byrd (D-WV)). This necessitated return to the House to again be voted on. In preparing the text for return to the House, certain numbers related to payments in the Medicare program for certain durable medical equipment were changed by mistake. The House voted on a resolution concurring in this Senate amendment (with the legitimately stricken provisions), but the text presented contained the erroneous number changes. The approval resolution was passed in the House and the text of the bill with errors in it was returned to the Senate for the preparation to be presented to the President. There, the mistaken numbers were corrected prior to the transmittal to the President. The bill as originally intended was signed into law, but some dispute remains as to whether both Houses of Congress passed the same legislation. The clerical mistake has given rise to several legal challenges to the law, generally from those who disagree with the policies included therein.
Representative Henry Waxman (D-CA) wrote a letter to Minority Leader (later Speaker) Nancy Pelosi on February 14, 2006 saying three experts he consulted (Professor Gerhardt, Professor Dorf, Professor Raskin) said the law was clearly unconstitutional.
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Several entities brought lawsuits challenging the law. Public Citizen, a legislative watchdog group, filed suit in US District Court for the District of Columbia. Attorney James Zeigler filed a similar suit in the United States District Court for the Southern District of Alabama. A case brought by an education finance company, OneSimpleLoan, went to the Supreme Court of the United States, Docket No. 07-492, on a petition for writ of certiorari to the Court of Appeals for the Second Circuit. The petition was denied in February, 2008.
Representative John Conyers, ranking member of the House Judiciary Committee, and ten other members of the House of Representatives sued President Bush (see Conyers v. Bush), the Cabinet Secretaries, and others in an action in district court in Detroit; the case was dismissed on November 6, 2006, citing the representatives' lack of standing. 
The Act saves nearly $40 billion over five years from mandatory spending programs through slowing the growth in spending for Medicare and Medicaid, changing student loan formulas, and other measures.
The reauthorization of the Temporary Assistance for Needy Families program was also contained in the bill, as was the provision for the Digital Transition and Public Safety Act of 2005. Part of the TANF reauthorization reduces the threshold for passport denial for child support arrearages under 42 USC 652(k) to $2,500.
Section 3005 of the Act also provided one and a half billion dollars for the Digital Transition and Public Safety Act of 2005 and defined in detail what comprised a coupon-eligible converter box for Digital Television broadcasts in the United States.
The impact on the elderly
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The legislation extends Medicaid's "lookback" period for all asset transfers from three to five years and changes the start of the penalty period for transferred assets from the date of transfer to the date when the individual transferring the assets enters a nursing home and would otherwise be eligible for Medicaid coverage. In other words, the penalty period does not begin until the nursing home resident is out of funds, meaning she cannot afford to pay the nursing home.
Because the change in the penalty period start date will likely leave nursing homes on the hook for the care of residents waiting ut extended penalty periods, ElderLawAnswers has dubbed the bill “The Nursing Home Bankruptcy Act of 2005.” Nursing homes will likely be flooded with residents who need care but have no way to pay for it. In states that have so-called "filial responsibility laws," the nursing homes may seek reimbursement from the residents’ children.
The bill also will make any individual with home equity above $500,000 ineligible for Medicaid nursing home care, although states may raise this threshold as high as $750,000.
The legislation also:
- Establishes new rules for the treatment of annuities, including a requirement that the state be named as the remainder beneficiary.
- Allows Continuing Care Retirement Communities (CCRCs) to require residents to spend down their declared resources before applying for medical assistance.
- Sets forth rules under which an individual's CCRC entrance fee is considered an available resource.
- Requires all states to apply the so-called “income-first” rule to community spouses who appeal for an increased resource allowance based on their need for more funds invested to meet their minimum income requirements.
- Extends long-term care partnership programs to any state.
- Authorizes states to include home and community-based services as an optional Medicaid benefit. (Previously, states had to obtain a waiver to provide such services.)
In addition, the legislation incorporates provisions in the original budget bill passed by the Senate closing certain asset transfer "loopholes," among them:
- The purchase of a life estate will be included in the definition of "assets" unless the purchaser resides in the home for at least one year after the date of purchase.
- Funds to purchase a promissory note, loan or mortgage will be included among assets unless the repayment terms are actuarially sound, provide for equal payments and prohibit the cancellation of the balance upon the death of the lender.
- States will be barred from "rounding down" fractional periods of ineligibility when determining ineligibility periods resulting from asset transfers.
- States will be permitted to treat multiple transfers of assets as a single transfer and begin any penalty period on the earliest date that would apply to such transfers.
While the federal law applies to all transfers made on or after the date of enactment (February 8, 2006), it also gives the states time to come into compliance. This gives many people in most states a little time to plan. The deadline for states to enact their own laws varies from state to state, but generally is the first day of the first calendar quarter beginning after the end of the next full legislative session.
- (Pub.L. 109–171, S
. 1932, 120 Stat. 4, enacted February 8, 2006)
- As has been the case with certain other U.S. budget laws, the official title of this Act bears a year date that is different from the year in which it was signed into law. Compare the Consolidated Omnibus Budget Reconciliation Act of 1985, which was signed into law in April 1986.
- Weisman, Jonathan (2006-03-22). "Spending Measure Not a Law, Suit Says". Washington Post. p. A04. Retrieved 2006-11-28.
- The "Byrd Rule" was never formally titled or codified as such. It was designated as such when the language was transferred from Title XX of the COBRA of 1985, as amended, to the Congressional Budget Act of 1974, Section 313 by the provision(s) in Section 13214 of the Omnibus Budget Reconciliation Act of 1990, Pub.L. 101–508
- H. Res. 663 (109th Congress): Resolved, That the House hereby concurs in the Senate amendment to the House amendment to the bill (S. 1932) to provide for reconciliation pursuant to section 202(a) of the concurrent... (Engrossed as Agreed to or Passed by House)
- Seven page PDF letter from Henry Waxman to Nancy Pelosi written on February 14, 2006 Archived December 27, 2006, at the Wayback Machine.
- Young, Jeffrey (2006-07-27). "Budget-typo plaintiffs see long road ahead". The Hill. Archived from the original on 2006-12-19. Retrieved 2006-11-28.
- "OneSimpleLoan, et al., Petitioners v. Margaret Spellings, Secretary of Education, et al.". Retrieved July 27, 2011.
- Associated Press (2006-11-06). "Judge Dismisses Budget Bill Lawsuit". ABC News. Archived from the original on February 3, 2009. Retrieved 2006-11-28.
- H.Res. 663: Resolved, That the House hereby concurs in the Senate amendment to the House amendment to the bill (S. 1932) to provide for reconciliation pursuant to section 202(a) of the concurrent... (Engrossed as Agreed to or Passed by House)
- "The Deficit Reduction Act: Important Facts for State Government Officials" (PDF). https://www.cms.gov. Retrieved December 16, 2016. External link in
- OneSimpleLoan v. U.S. Secretary of Education
- Public Citizen v. Clerk
- Congressional Budget Office estimate for Deficit Reduction Act of 2005
- President Signs S.1932, Deficit Reduction Act of 2005 (US gov't news release)
- Deficit Reduction Act of 2005: Implications for Medicaid (Kaiser Family Foundation)